Bangladesh enacted commodity exchange rules

Bangladesh enacted commodity exchange rules

October 17, 2023.

The Bangladesh Securities and Exchange Commission (BSEC) has recently published a new notification (BSEC/CMRRCD/2009-193/65/PRD/147 dated October 2, 2023) to regulate the commodity exchange market in Bangladesh, titled ‘The BSEC (Commodity Exchange) Rules, 2023’.

The Rules, which include 66 rules as well as many forms and exhibits, seek to ensure fair, efficient, transparent, and orderly trading of commodity derivatives contracts, protect the interests of investors and the public, and encourage the growth of the commodity derivatives market.

The new rules address several facets of the commodities exchange market, including registration, conduct, supervision, inspection, discipline, and enforcement. Here are some major highlights:

Registration:

The rules outline the procedures for registering commodities exchanges, commodity derivatives brokers, clearing houses, and clearing and settlement companies. The registration is subject to BSEC approval and meeting certain restrictions and requirements.

The regulations provide norms of conduct for registered entities and their directors, officers, employees, and agents. The norms include obligations of care and loyalty, prohibition of fraudulent and manipulative actions, and the keeping of books and records, among others.
Supervision: The rules require registered entities to establish and maintain methods to monitor their operations and activities. Internal controls, risk management methods, monitoring techniques, and other features should be included in the systems.
Inspection: The rules allow the BSEC to inspect registered firms to ensure compliance with the rules and other applicable legislation. The BSEC can also take corrective measures or issue penalty depending on the inspection findings.

Discipline:

The rules establish disciplinary procedures for dealing with rule infractions by registered entities or their related persons. Discipline proceedings may include warnings and fines, as well as registration suspension or revocation.

Enforcement: The regulations establish methods for enforcing the BSEC’s rules and orders. Adjudication proceedings, appeals to the BSEC or the courts, and other methods are used to enforce the rules.

The new guidelines are a significant step forward in regulating Bangladesh’s commodity exchange industry. They establish a comprehensive legislative framework to ensure market integrity and investor protection. However, they place significant obligations on market participants. As a result, everybody active in the commodities exchange market must understand and follow these regulations.